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Urban Infrastructure

Cities remain key to a country’s economic success. As such, it is essential to invest in and maintain the right infrastructure to support those cities. Growing city populations are straining out-of-date structures and transport systems, and there remains a significant—and growing—gap between the need for new or improved infrastructure and the projected delivery of that infrastructure.

In the face of budgetary pressures, governments have to find ways to drive effective infrastructure improvements. Tomorrow’s cities need to harness smart technologies, link to rural areas and other cities, and become financial and social hubs that will attract more private sector investment, which in turn can fund further infrastructure improvements.

There is an estimated $25 trillion gap between the projected need for global infrastructure investments through 2030 and projected spending. But capital alone will not solve the challenges that exist today. Cities should also rethink the way new infrastructure projects are selected, executed, and managed.

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Governments must stop investing in infrastructure as they have done in previous decades. Instead, BCG’s Jeffrey Chua explains, they must clearly articulate and prioritize the most critical projects in infrastructure, formulate a holistic and integrated funding and financing strategy to address the deficit in infrastructure investment, enable and facilitate the use of the latest technologies to ensure that infrastructure investments today are future-proof, and build the government capacity and capabilities needed to address these challenges.

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Necessary infrastructure investments in Africa are estimated to exceed $90 billion over the next few years, and such a significant challenge requires an approach that aligns incentives and focuses on delivery, BCG’s Euvin Naidoo explains. BCG’s methodology helps focus on fewer, higher-impact projects, accelerate those critical projects, and create very clear milestones that ensure the delivery and execution of immediate goals.

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The Road to Quality, Sustainable Infrastructure

Cities can narrow their infrastructure gaps by transforming the efficiency of the entire infrastructure lifecycle. This requires action in four key areas:

Targeting the right investments is the foundational first step. It demands an institutional solution with several components, including a rigorous, transparent, and independent review of all proposed investments, as well as a performance tracking mechanism. Decision-makers must also identify any assets that could be more efficiently managed under a privatized model.

An effective infrastructure strategy is focused on broadly meeting the needs of the public rather than delivering a specific asset or financial outcome. This requires new revenue models and better collaboration with the private sector.

Governments should embrace the lean processes typical of large efficient manufacturing operations. This includes dividing construction into small subprojects, managing logistics to ensure efficient material and resource flow, and creating a process that detects defects early and allows for quick corrections.

The first three steps won’t succeed unless done in a stable macroeconomic, political, regulatory, and business environment. To build such an environment, cities need to establish strong governance of and coordination among public-sector institutions, facilitate investment by private sector players, and support the development of robust capital markets.

In the end, countries that invest in and manage their infrastructures effectively stand to reap significant gains in economic growth and the quality of life of their citizens.

The gap between the projected need for global infrastructure investments through 2030 and projected spending is expected to reach $25 trillion.

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